charts say it is for real. there is always a bull market somewhere. i will see you tomorrow. good evening. this is "the kudlow report". washington said if they don't fish t fix the problem we will have a sudden problem. the leading democratic senator forget to read a bill he was sponsoring? he is backing away from the measure that would have given them the power to read your e-mails without a search warrant

without the signature of a judge. this week hostess now back on the chopping block. are the unions trying to ruin the holidays and the economy for everybody? >> first up this evening tonight fed chairman ben bernanke gave a warning fix the fiscal cliff or we are headed for a severe recession, so far, no concrete proposals and i have to ask again, are we headed for a stalemate or can we find an economy saving common ground. let's talk. we have abigail disney.

we'll have a sudden fiscal cliff? >> i worry about the damage that mighting done in fixing it. you don't think the tax increases that could come at the end of the year and the spending cuts of less 100 build, you don't think those would in deuce a severe recession and everybody on wastreet? >> they are not that big of rate increases so far.

welcome to the show and what would you do about it? >> they are proposing letting the bush tax cuts stand for everyone because the top 2%. if you raise them and closing the interest loop hole, fixing the estate tax you come out to $100 trillion in savings. >> serious question, you have a famous name and we welcome you onto the program. do you record that as rich? >> what i regard is irrelevant haven't, the fact of the matter is they represent the bottom of the 2% of easternrners in the

country. the question is an interest heihe i interesting one. we have been cherry picking the stories. the fact is that 3% of businesses will be affected by these increases. could be a big three percent though. let me go back to casey mulligan. i believe she is in favor of raiseing the capitol gains tax. how do you look at that. is that going to help the economy grow or not? taxes on capital, people paid the tax and then you are taxing them again. they will move elsewhere.

there will be few er places to work. i would love to see them cut spending back. that is a tax on labor, it is a tax on high income labor and bring in a high revenue. >> you are heard that, what is your take on that one? >> you know, all we are looking to do is raise the capital gains tax to what it was during the clinton years. people built enormous empires and wealth and they didn't go away and they didn't go into

other sectors to avoid that capitol gains tax. it was 20%. all we are looking to do is roll back the bush tax cuts which we couldn't afford. and the last ten years are clear evidence that we couldn't afford that. i would put in that he worked well with newt gingrich. but i want to add one point. when you say we need to go back to the clinton tax rates. you have the bamcare taxes. you have a 0.9% payroll tax increase. so you are going to go way past the clinton rates and up to 24 or 25% on cap gains and 45% on dividends. there isn't a single shred of evidence that that does anything

to inhibit jobs and hiring. i have no doubt that is what your group is called. have you yourself contributed to the treasury? >> this is a question of what is optional. i sat back and watched my country grow a huge deficit while i accumulated money that was handed to me while i had tax increases that i didn't ask for. so i want to see my class step up and do what it has the capacity to do. >> you may have a chance who knows. thank you. >> casey mulligan, thank you very much. now let's go to grover, he has

never been more prominent. here is my question for you. the republican ares are taking about tax hikes. it doesn't kill the country if we raise taxes a little bit on millionaires. that is bill crystal weekly standard. what is your take on the verbal time bomb? >> he focuses on other issues and has said before that he would leave the republican party and join the liberal hawks if the party was pro war in the past. i don't know how he gets plural on hawks. but the party is committed to

low taxes and limited government and the people who aren't there can't call themselves republicans or conserve taticon. after this elicks grover, did people want to see common ground to deal with a fiscal cliff recession or trillion deficits as far as the eye can see? is the gop going to play a weak hand is that going to happen here? >> i would argue the republican house has as much power as the president. with solid majority that will continue for year to come because of redistricting and they were running a committed

not just to stopping the tax increases to spending but voted for the ryan plan. it reforms entitlements and takes the tax rates to 25% and it is a co hern't ent package. obama wrote a budget that no democrat voted for, it was that silly. it claimed savings by not occupying iraq for the next 20 years. he won a mandate not to be romney. he did not win a mandate not to raise taxes and fix the economy. >> john boehner says we can cap deductions, probably produce

$400 billion coming up pretty fast. no change in tax rates. so it is not a flat tax reform but no increase in marginal tax rates. can you and your pledge, with the pledge be okay with the bay nor plan to increase revenues by capping deductions? he has not endorsed raising taxes nor did he a year ago. if you eliminate deductions now, you have destroyed the opportunity for tarx reform a year ago. they are not available to reduce tax rates. >> so you are opposed to it.

it is bad for the economy and it destroyed our effort to get tax reform down the road. >> i have talked to staff and remembers and they don't need to hear it from me, they know that lower marginal tax rates are necessary for growth and the only way to get the revenue to pay down obama's debt. >> help me out, in effect, is the plan to put a cap on deductions, does his plan break the americans for tax reform no-tax pledge? >> to be clear. john boehner has not said that. he says he is for revenues from growth. i'm for that. that is a tax increase that is

what obama wants and it does affect the margin because they are going to attack certain income groups. >> i hear you. thank you very much. here is another economic disaster coming. thanksgiving starts the economic season. and this year, unions seem to want to ruin everything. but first -- >> the problem is the squeeze. you see as government employers try to keep up payments they have to slash other service that is we need. >> that is illinois governor pat kwint. he is trying to explain the state's massive sortfall. illinois taxpayers are giving him a huge thumbs down. that is ngovernor quinn of

illinois. companies are moving out of his state. he is going to go down or his whole state is going to go down. anyway, back to washingtoning. the senate is going to vote on a bill that could let the feds read your e-mails without even a warrant. the bill's own sponsor probably never read his own bill in the first place and now, this goofy guy has withdrawn his support. free market capitalism is the best path to prosperity. but let's lower those rates too. how about a ko dudlowian flat t? i'll be right back. lives in the,

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incredible intrusion into your personal freedom. vermont senator the leading democrat sponsoring this bill denies supporting his own bill. what happened? did he miss the part about rights? we have ckathrine mangaward thi is really something. don't need a search warrant to go into your e-mails. in fact you don't even need prob probable cause. this would be an incredible violation of rights. >> if the whole thing aren't

such a mess this would be funny. he wants to read our e-mails without a warrant. the reason this bill is being messed around with right now is it was supposed to be dealt with in september but they were worried that it would be harder to read e-mails. let me just read some of the federal aid. krong but all they have to do is declare an emergency and get a subpoena and go in and read your e-mails. tell me why the local

authorities don't like this. this is the version they like. what they didn't like was a previous version which meant more in line to require a warrant and say we don't think that it is an emergency to look into somebody's google docks. this version came out after the pushback. they want -- they pushed him into this. he is run aring for the hills this guy and i want to ask you, what is going to happen to this thing. you know in washington, the bills come up and then they come back around another time. we have to guard against this. what are are you going to do to stop this? >> there is no way to put a stake through any bill ever. i think this whole thing has

been so embarrassing for lahey that he will keep an eye on them in the future. he does think there should be warrants for these searches and there are powerful interests who would rather think that they would not be. what would it mean for personal freedom? >> the federal reserve, they could declare a kudlow emergency. i don't know what they expect to find? what does this mean top personal liberty? it would be a huge blow. i don't mean to over state the case, but the fact is this is giving 22 government agencies, the federal maritime commission. it is not just e-mail. this is the kind of thing where the tee taidetails of the law, r

this law is amending a bunch of laws from the 80s. >> thank you very much. we appreciate you coming on the show. elmo the furry red monster on says sesame street, has had damage done to the brand and pbs itself later in the show. meanwhile housing starts. it is the highest rate in 44 years. mortgage rates and two of the reasons why there is more building activity. today's home starting are 40% of

where they were in january 2006. but you know what, i'm all or economic optimism and housing could wind up being a big plus in the years ahead. meg whitman in control tonight and a former hedge fund manager charged in a trading scheme. those stories right after the break.

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an $8.8 billion accounting error sent hewlett-packard stock falling today. bertha coombs joins us today. >> the fbi is looking into the hp account iing impropriety. deal culminated under former manager. >> former portfolio manager investors acharged today in the most lucrative insider case today. 38-year-old matthew martomo

accused in illegal profits from a doctor involved in an alzheimer's drug trial. the unit owner was aware of the trades. spokesman tells cnbc that cohen and the firm are cooperating with the probe. he is the third employee that has resulted in more than 60 convictions so far. >> we appreciate the update. now let's go to the war in the middle east. still no cease fire deal. israel. you will never guess which target they took out today. that whole story continues and is up next.

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welcome back to the kudlow report. it seems like everywhere i look, there is another union strike. what do they want?

a european style general strike to wreck the holidays and the economy? while peace talks are on the economy, now, hillary clinton is coming into play. >> president obama asked me to come to israel with a clear message. america's commitment to israel's security is unwavering and that is why we believe it is essential to dees kal late the situation in israel. >> all right that of course was secretary of state hillary clinton a few hours ago. >> did israel get down what they

needed to get down? we have former u.s. ambassador. mark, i ask you first. the negotiations for peace is going to take whatever. are they getting done what they need to get down to take out the hamaas military all it is going to do is get to a point where hamas is out of missiles. and so there will be another round of missile firing because there will be no durable missile firing. you have the head of the muslim

brotherhood sympathizes with hamas. who is to say iran working through will replentish the weapons loss and we'll go through this whole thing all over again? >> good evening larry and mark. i'm told that hamas is boasting tonight of major success. because for the first time ever hamas has seen delegations of foreign states. into the gaza strip so hamas the terrorist organization is celebrating all of this success and now hillary clinton is

heading to cairo, this is a celebration for the bad guys. >> what is secretary clinton going to do? the bad guys are proclaiming victory here. those are bad guys. i don't see how in the world this can play out favorably for israel. i would have liked secretary clinton to have said those words two or three years ago. this has been a low grade constant conflict since the 2008 invasion that did not take out hamas. this is going to be a major boom for the arab contractors. and of course, hamas is going to

replentish more weapons and get more money from countries like katar that put down $450 million from the privilege from the visit what is that all about. i would like mrs. clinton to go to katar and ask them what did they get for their $450 million payment. >> we talked about this on your radio show years ago. i think we both thought it was a terrible idea at the time. was do you make of it now, john? why did they give up the strip? they are going to have aggravation until the end of time with this? >> it was a strategic catastrophe. he looks like a peace maker.the

they can turn them off. it sis important that it only hs one air force. and also hamas and sinai, israel is surrounded by enemies and they are opening our hands towards the bad guys. >> how can marsy be trusted. hillary clinton is going over to do some business with him and try and create a cease fire andtruce. and yet his role he is on the wrong side. he is against israel and therann

wants to blow him into the sea. john and i may have a difference of opinion here. i think the jury is still out. hamas is the part of the muslim brr prrn brotherhood. but he still has to get united states at other countries if he decides that he is going to empower hamas, then, the cards will be on the table, the united states can't play this game of either or with him and he is going to decide that he is going to control hamas or not. if he doesn't, then we know where we are going to be at that

point. he will live with the questions of not having multi lateral organizations. >> i'll give you last word. >> facts on the ground. 220 super grads aren route from iran into the sinai. will morsey stop them? i think he will not. i will wait for the events. >> will he stop them? boy, i wouldn't bet on that. thank you very much. i appreciate it. now to another major headline today. the man behind elmo is leaving amid a sex scandal allegedly involving at least one underaged boy. awful. one lawsuit has been filed. the question is, if there are

others out there, can the show and pbs itself be implicated in some way. [ male announcer ] you are a business pro.

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the man behind one of tv's most beloved children's characters resigns. >> good evening. it is a shocker. his name is kevin clash. he resigned today have a $5 million lawsuit was filed against him. it is cueses him of control iin lines for under age boys. he said he came forward after he heard of another 24-year-old coming forward last week. we should say, though, that that first accuser later recanted.

clash said that first relationship only happened after he was of legal age. he has not made any comment of this latest accusation. i think it would be hard to over state the importance of clash to elmo. he turned him into a superstar with a huge marketing potential. larry anywhere from half to two thirds or three quarters in a given year or elmo products. >> that is tough stuff. now, so bus the scandal spell trouble for the brand image or pbs itself. here now is the ceo of the pr agen agency. welcome back.

kevin clash invented elmo and kept it go. how much damage to the show itself? i think the elmo brand, is larger. i think at the end of the day that elmo is larger than any one person. as long as the show and pbs handle it correctly, let's not forget that the people watch in the show don't understand it. the next question though gets tougher.

there may be other lawsuits and penalties to says mi street and to pbs what do you think, what is the risk here? i don't think one bad prayer defined the nfl, one individual define elmo. i think your demographic is a one, two, three or four-year-old. they don't know the whole story. my kids are saying why is elmo in your newspaper. i think they are lucky that they are asking. >> there are going to be lawsuits. if the other allegations turn up, there will be other

lawsuits. right now there is $5 million on the table. my question to you is, what is the downside risk here. it is a financial and legal risk. that is going to be the thing that gets them. unless pbs knew about this, it is doubtful that there will be a lasting impact. >> who has to cover it. if sesame street has $35 million in fines, i'm guessing, if they have position to cover it, does pbs have to back stop them? those are the questions i'm asking. in my mind, elmo didn't exwally harass anyone.

kevin clash did. there will be many legal and marketing questions. but i don't believe from a brand or marketing standpoint this will be long-term. i'm saying to you my friend, there may be legalen tanglements that could bring the whole story down. it is not the kids watching the show, it is the financial problems. next up, wal-mart hostess airports you name it. the unions are going on strike. we are about to debate it all.

union labor threatening our holiday cheer. hostess twinkies what is up here? is this some type of general strike attempt? here now to tell us is the author of state of the union. he is a union opponent. all of these airports now this business with wal-mart which i

learned today. what do you think the general public is going to say about unions busting up thanksgiving busting up black friday and actually on top of all that, busting up the hostess brands? >> wow, that is quite an in tro. >> that is what is happening. that is the way i see it. let's take the first thing you mentioned and the last thing you mentioned. what this is, is a company that has not been able to manage itself. it has gone through 7 ceo's. it has been in and out of bankruptcy court. and it has given through all of this, it has given lavish raises. they had promised the court they would put into reinvesting in the company.

i think there is a lot of truth into what you say. the new guy is going to put this thing into liquidation. i said to him, why didn't you take the same deal the teamsters did. i think that was a poor argument. so 18.5,000 people are going to lose their jobs. justin, this goes beyond. now we are back to wal-mart. here is the union movement and the left. they love to hate wal-mart. a store with low prices that loves to help the middle class. and here they go again, i don't get it. >> we did a recent poll, employed 99 americans. and 13% of people said yes. gallop says that the union popularity just keep shoveling

deeping and deeping into the public relations. i think the unions seem to believe that they keep pushing. you know with respect to hostess. the company had 372 collective bargaining agreements. they had employer pension funds. there was nothing and the union knew that they were trying to step in and try to solve this. >> justin, i'm going to ask you both the same question. do you think, this thanksgiving timing is all a bit odd to me. the wal-mart assault. if wal-mart wants to be open on thanksgiving day, fine. if you don't want to shop there then don't shop there. do you think that the dwrunionse embolden of president obama

which refused to rule on the wal-mart protest refused to go near it? do you think they see the win that they are back? >> for the hundreds of millions of dollars, abluteall labslewed going to do well if they are going to make demand or union benefits. i say to myself, so if the union attempts to go to the union down the road. we are as bad off in part, you know, the unions protesting on their busiest day goes after the brands on the airlines themselves. kicking the airlines when they are down. >> what is your reaction, this airline thing, let's see, there

is absolutely striking protesting in lax, a threat in jfk, portland airport or the portland port. you are going to lose whatever support you have left. president obama can't bail you out. >> i agree with both of you. there is a risk when labor strikes takes action at a time like this. there is a trade off. you might infeweriate the public. but as far as the number of people, it is not positive attention. you are right. there is a phrase, all news is good news. it is not true. the dwrunions are digging a hol. >> i think the percentage of people that would like to djoina

union is far higher. if that was the case, they had allies all overwashington. they don't anymore and they are not all that happy with this president. >> i think it is odd that after president sweeps the election. all of a sunddden on a thanksgiving holiday, if it is not a recession, it is a slow-based recovery. it strikes me as odd. the companies that the unions and the left love to hate. they love to go after wal-mart and here they go again. maybe it has nothing to do with the election. i got 20 seconds. >> when it kim to hostess there was a petition on the website to

have the government bail out hostess. the unions knew that something like that was going to be cal d ed for. >> we appreciate it very much. that is it for tonight's show. thank you for watching. i think the unions are making a very big mistake. twins. i didn't see them coming.

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